Obama: Overhaul the Corporate Tax Code

By Jennifer Merritt

As part of his broader effort to bring down the deficit and win support from both parties for his budget proposal, President Barack Obama pledged not only to work to rein in entitlements like Medicare and Medicaid, but also, according to The Wall Street Journal, “overhaul the tax code to root out ‘spending embedded’ in it—a reference to tax breaks.”

It’s partly a shot at the corporate tax rate–which on the surface seems to be quite high, but in reality is so full of loopholes that many corporations ultimately pay very little in taxes. US News & World Report blogger Susan Milligan–echoing Tax Guy Bill Bischoff–says lowering the corporate tax rate isn’t really the answer. It’s true that many U.S. companies pay significantly lower effective rates than the official top rate, but many tax experts say it’s still high enough to be a drag on domestic investment.

Still, closing the loopholes is far more critical, argues Milligan, who says, “Lowering the corporate tax rate would cost jobs. Mind you, the job loss would not be among those sad grunts now pictured in newspapers, signing up for unemployment benefits. No, the new unemployed would be the well-paid tax attorneys who scour the tax code for loopholes. They would be followed in the unemployment line by the lobbyists who bustle around Capitol Hill fighting to keep those loopholes.”

That’s a lot of reform being proposed, demanded and hoped for. And plenty of politics and partisanship standing in the way of any moves to change entitlements, loopholes and other benefits companies and individuals would be loathe to give up.

Readers, what are the odds for real tax code reform? What do you believe is most likely to go from proposal to reality this year? Next year?